Providing service to NPO

May 02, 2008 4 Replies
M

A colleague has queried me about providing a service for a Not For Profit organization and has claimed the invoice I send need not include tax fees. As it is a good cause, I'd like to help. I wish to charge him much less than my normal fee. If I charge 1K for services, do I need to pay tax on those earnings?



========================================= MODERATOR'S COMMENT: This sounds like a state or local sales or excise or similar tax? If so, the state or local tax authority might have established procedures and forms to cover this situation. For example, if the organization furnishes you with a State Tax Exempt certificate which exempts it from paying a state or local tax, you might be allowed to avoid invoicing or collecting or paying that tax to the state.


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S

You need to pay income tax on all your earnings.

In some states, sales of services are subject to sales tax.

In some states, certain non-profit organizations (e.g. 501(c)(3)) are exempt from paying sales tax on their purchases.

Seth

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M

Thanks. I appreciate the feedback.

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K

,

Misfit, just be sure you get a certificate from the organization documenting that it is eligible to purchase your services without sales or use tax (an exemption certificate). Otherwise you generally must assume that the sale is taxable, and you will be responsible for paying the tax to the state whether or not you have collected reimbursement from the organization.

Katie in San Diego

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M

,

Wonderful. I have asked for the documentation. His legal provider is supposed to produce the certificate this week. Thanks very much for all the assistance. M.

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